Posting Journal Entries to Ledger Accounts

The second step of accounting cycle is to post the journal entries to the ledger accounts.

The journal entries recorded during the first step provide information about which accounts are to be debited and which to be credited and also the magnitude of the debit or credit (see debit-credit-rules). The debit and credit values of journal entries are transferred to ledger accounts one by one in such a way that debit amount of a journal entry is transferred to the debit side of the relevant ledger account and the credit amount is transferred to the credit side of the relevant ledger account.

After posting all the journal entries, the balance of each account is calculated. The balance of an asset, expense, contra-liability and contra-equity account is calculated by subtracting the sum of its credit side from the sum of its debit side. The balance of a liability, equity and contra-asset account is calculated the opposite way i.e. by subtracting the sum of its debit side from the sum of its credit side.

Example

The ledger accounts shown below are derived from the journal entries of Company A.

Asset Accounts

Cash			Accounts Receivable
$100,000	$36,000		$21,200	$15,300
28,500	60,000
32,900	17,600
15,300	19,100
4,000	19,100
	5,000
	3,470
$20,430			$5,900

Office Supplies			Prepaid Rent
$17,600			$36,000
5,200
$22,800			$36,000

Equipment
$80,000
$80,000

Liability Accounts

Accounts Payable			Notes Payable
$17,600	$17,600			$20,000
	5,200
	$5,200			$20,000

Utilities Payable			Unearned Revenue
	$2,470			$4,000
	1,494
	$3,964			$4,000

Equity Accounts

Common Stock
	$100,000
	$100,000

Revenue, Dividend and Expense Accounts

Service Revenue			Dividend
	$28,500		$5,000
	54,100
	$82,600		$5,000

Wages Expense			Miscellaneous Expense
$19,100			$3,470
19,100
$38,200			$3,470

Electricity Expense			Telephone Expense
$2,470			$1,494
$2,470			$1,494

The ledger accounts step of accounting cycle completes here. The next step is the preparation of unadjusted trial balance.